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on Insurance Economics |
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Issue of 2021‒03‒15
24 papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Benjamin Ly Serena (University of Copenhagen) |
| Abstract: | Mental illness is a leading cause of disability worldwide with vast costs to society. Yet, insurance coverage for effective treatments remains limited. This paper revisits the Offset Hypothesis, which claims insurance coverage for psychotherapy is self-financing through reductions in the use of other health care services and improved labor market outcomes. I study a 2008 reform of the Danish public health care system that introduced 60 percent coverage of the cost of psychotherapy for depression and anxiety patients below age 38. Using Regression Discontinuity and Difference-in-Difference designs, I show that psychotherapy coverage reduces the use of other mental health services, physical health care and suicide attempts, but does not impact employment, sick leave or disability pension receipt. Still, the reduction in health care costs is sufficiently large to finance the policy. This suggests mental health coverage is both welfare improving and cost reducing. |
| Keywords: | mental health, health insurance, health care, offset, labor market |
| JEL: | I13 I18 I38 H51 H55 |
| Date: | 2021–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kucebi:2105&r=all |
| By: | Michael Levere; Heinrich Hock; Nancy Early |
| Abstract: | The authors estimate the impacts of losing access to parental health insurance on Supplemental Security Income (SSI) participation, focusing on the age†26 limit for dependent coverage. |
| Keywords: | Affordable Care Act , disability policy , health insurance , supplemental security income |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:bf17ad00dcb34c6f92ceb5aa7c91b1e4&r=all |
| By: | Colleen Carey |
| Abstract: | In many federally-subsidized insurance markets, insurers are subsidized on the basis of enrollee characteristics; in principle, subsidies that are "risk adjusted" in this way compensate insurers for ex ante differences in expected cost. Between 2010 and 2011, the subsidies in Medicare Part D were revised, sharply changing the subsidy for diagnoses and demographic characteristics. This paper uses the response of insurers to the subsidy update to estimate pass-through of government subsidies to two insurer choice variables: premiums and out-of-pocket costs. We find that diagnostic subsidies are passed-through at a rate of 40% to the out-of-pocket costs for relevant drugs. Premiums are not responsive to overall subsidies, but do reflect changes in the demographic component of subsidies. |
| JEL: | H51 I11 L13 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28529&r=all |
| By: | Luciana Galeano; Alejandro Izquierdo; Jorge P. Puig; Carlos A. Vegh; Guillermo Vuletin |
| Abstract: | It is well-known by now that government spending has typically been countercyclical in industrial countries and procyclical in developing economies. Most of this literature has focused on analyzing aggregate government spending or discretionary spending categories such as government consumption and government investment. Little is known, however, about the cyclical behavior of automatic government spending, which comprises unemployment insurance, family programs, and social security transfers. Automatic government spending follows from laws, or even constitutional clauses, that benefit individuals who meet certain eligibility criteria. In principle, the main categories of automatic government spending are expected to be either countercyclical (especially unemployment insurance and other shock absorber programs) or acyclical (particularly social security and other structural programs). We find that while automatic government spending is, as expected, countercyclical in industrial countries, it is, surprisingly, procyclical in the developing world. We track the source of this puzzling procyclical behavior to (i) the effective lack of automatic stabilizers like unemployment insurance and (ii) more intriguingly, the existence of perverse automatic de-stabilizing mechanisms in social security spending (in particular in the absence of indexation mechanisms). We also show that the presence and nature of these two social programs are crucial new determinants of aggregate government spending cyclicality as well as macroeconomic volatility, even after controlling for other well-known determinants and addressing potential endogeneity concerns. |
| JEL: | E02 E32 E62 H53 H55 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28521&r=all |
| By: | Biroli, Pietro (University of Zurich); Zwyssig, Laura (University of Zurich) |
| Abstract: | Decision-making in the realm of health behaviors, such as smoking or drinking, is influenced both by biological factors, such as genetic predispositions, as well as environmental factors, such as financial liquidity and health insurance status. We show how the choice of smoking after a cardio-vascular health shock is jointly determined by the interplay between these biological and environmental constraints. Individuals who suffer a health shock when uninsured are 25.6 percentage points more likely to reduce smoking, but this is true only for those who have a low index of genetic predisposition to smoking. Individuals with a low index of genetic predisposition are more strategic and flexible in their behavioral response to an external shock. This differential elasticity of response depending on your genetic variants is evidence of individual-level heterogeneity in moral hazard. These results suggest that genetic heterogeneity is a factor that should be considered when evaluating the effectiveness and fairness of health insurance policies. |
| Keywords: | moral hazard, genetics, smoking, medicare |
| JEL: | I12 I13 D63 D91 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14176&r=all |
| By: | Gaillard, Alexandre; Kankanamge, Sumudu |
| Abstract: | We evaluate the effects of unemployment insurance variations in a general equilibrium occupational choice model of entrepreneurship. We establish that the occupational flow from unemployment to entrepreneurship is remarkably sensitive to unemployment insurance generosity, corroborating our empirical findings. Beyond direct effects on unemployment, we find large reallocations between employment and entrepreneurship relative to changes in generosity. They contribute to an empirically consistent stable aggregate employment rate, despite increasing unemployment. We show that an insurance coverage effect, i.e. a change in the relative riskiness between occupations with respect to generosity, is a key driver of our results. |
| Keywords: | Entrepreneurship; Unemployment Insurance; Labor Market Mobility |
| JEL: | E24 J65 E61 |
| Date: | 2021–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:125253&r=all |
| By: | Patricia Rowan; Ruth Hsu; Télyse Masaoay; Stephanie Parver |
| Abstract: | This report profiles the quality rating systems of five state Medicaid managed care programs and compares them with the rating systems used in the Medicare Advantage program and for Marketplace qualified health plans. |
| Keywords: | quality rating systems, Medicaid, managed care, quality measurement |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:ffde1cf0588f4db0aa7d8dac9a697d74&r=all |
| By: | Elena Falcettoni; Vegard Nygaard |
| Abstract: | Congress passed the first COVID-19 relief package for businesses and individuals in March 2020, when the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted, providing, among other things, one-time stimulus checks for individuals, extended unemployment insurance (UI) benefits, relief for state and local governments, liability protection, and the Paycheck Protection Program for small-business loan forgiveness. |
| Date: | 2021–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2021-02-24-2&r=all |
| By: | Stockton, Matt; Rudnick, Duran; Burr, Chuck |
| Keywords: | Farm Management, Production Economics |
| Date: | 2020–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:nbaece:309752&r=all |
| By: | Kevin Callison; Brigham Walker; Charles Stoecker; Jeral Self; Mark L. Diana |
| Abstract: | The authors examined changes in hospital uncompensated care costs in the context of Louisiana’s Medicaid expansion. |
| Keywords: | Uncompensated care, Medicaid, Hospital costs, Hospital care, Affordable Care Act, Cost reduction, Nonprofit status, Cost sharing, For-profit status |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:3ae1c8a28ef6496bbfbf38b5526d8772&r=all |
| By: | Mitman, Kurt (Stockholm University); Rabinovich, Stanislav (University of North Carolina, Chapel Hill) |
| Abstract: | We investigate the optimal response of unemployment insurance to economic shocks, both with and without commitment. The optimal policy with commitment follows a modified Baily-Chetty formula that accounts for job search responses to future UI benefit changes. As a result, the optimal policy with commitment tends to front-load UI, unlike the optimal discretionary policy. In response to shocks intended to mimic those that induced the COVID-19 recession, we find that a large and transitory increase in UI is optimal; and that a policy rule contingent on the change in unemployment, rather than its level, is a good approximation to the optimal policy. |
| Keywords: | unemployment insurance, unemployment, optimal policy, COVID-19 |
| JEL: | J65 E6 H1 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14085&r=all |
| By: | Saki Bigio; Yuliy Sannikov |
| Abstract: | This paper integrates a realistic implementation of monetary policy through the banking system into an incomplete-markets economy with wage rigidity. Monetary policy sets policy rates and alters the supply of reserves. These tools grant independent control over credit spreads and an interest target. Through these tools, monetary policy affects the evolution of real interests rates, credit, output, and the wealth distribution—both in the long and in the short run. We decompose the effects through a combination of the interest and credit channels that depend on the size of the central bank’s balance sheet. Monetary policy reaches an expansionary limit when it enters a liquidity trap. The model highlights a trade-off between worse microeconomic insurance (insurance across agents) and greater macroeconomic insurance (insurance across states). The model prescribes that monetary policy should operate with a small balance sheet which tightens credit during booms, and should expand its balance sheet and lower policy rates during busts. |
| JEL: | E31 E32 E41 E42 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28540&r=all |
| By: | Christine Blandhol; Magne Mogstad; Peter Nilsson; Ola L. Vestad (Statistics Norway) |
| Abstract: | Do employees benefit from worker representation on corporate boards? Economists and policymakers are keenly interested in this question – especially lately, as worker representation is widely promoted as an important way to ensure the interests and views of the workers. To investigate this question, we apply a variety of research designs to administrative data from Norway. We find that a worker is paid more and faces less earnings risk if she gets a job in a firm with worker representation on the corporate board. However, these gains in wages and declines in earnings risk are not caused by worker representation per se. Instead, the wage premium and reduced earnings risk reflect that firms with worker representation are likely to be larger and unionized, and that larger and unionized firms tend to both pay a premium and provide better insurance to workers against fluctuations in firm performance. Conditional on the firm’s size and unionization rate, worker representation has little if any effect. Taken together, these findings suggest that while workers may indeed benefit from being employed in firms with worker representation, they would not benefit from legislation mandating worker representation on corporate boards. |
| Keywords: | Worker compensation; Worker representation; Corporate governance; Unions |
| JEL: | G34 G38 J31 J54 J58 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:947&r=all |
| By: | Eva-Maria Egger; Cecilia Poggi; Héctor Rufrancos |
| Abstract: | This study explores the relationship between household poverty and depth of informality by proposing a new measure of informality at the household level. It is defined as the share of activities (hours worked or income earned) without social insurance for wage workers in the household. We apply cross-sectional regressions to five urban sub-Saharan African countries, showing that a household head informality dummy obscures a non-linear relationship between the depth of household informality and welfare outcomes. |
| Keywords: | Informality, Measurement, Poverty, Social protection, Sub-Saharan Africa |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2021-25&r=all |
| By: | Petr Jakubik (European Insurance and Occupational Pensions Authority (EIOPA), Germany; Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies, Czech Republic); Saida Teleu (Maltese Financial Services Authority, Malta; Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies, Czech Republic) |
| Abstract: | The recent Covid-19 outbreak with significant increase of global uncertainties poses many challenges for financial sectors. Many supervisors took the measures aiming to safeguard resilience of financial institutions by requesting postponements any dividend distributions until uncertainties about further development will be reduced. In this respect, the European Insurance and Occupational Pensions Authority issued on Thursday 2nd April 2020 a statement requesting (re)insurers to suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders. Although this should have a positive impact on the overall financial stability of the sector, it could also negatively influence insurers’ equity prices. Hence, this paper empirically investigates this potential effect using an event study methodology. Despite negative drops were observed in some cases, the obtained empirical results suggest that they were not statistically significant for the overall European insurers’ equity market when considering the event windows covering a few days after the statement was published. |
| Keywords: | European insurance sector; suspension of dividend distributions, event study, EIOPA statement, equity market |
| JEL: | G22 G28 G35 G01 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_05&r=all |
| By: | Juliane Begenau; Tim Landvoigt |
| Abstract: | How does the shadow banking system respond to changes in capital regulation of commercial banks? We propose a quantitative general equilibrium model with regulated and unregulated banks to study the unintended consequences of regulation. Tighter capital requirements for regulated banks cause higher convenience yield on debt of all banks, leading to higher shadow bank leverage and a larger shadow banking sector. At the same time, tighter regulation eliminates the subsidies to commercial banks from deposit insurance, reducing the competitive pressures on shadow banks to take risks. The net effect is a safer financial system with more shadow banking. Calibrating the model to data on financial institutions in the U.S., the optimal capital requirement is around 16%. |
| JEL: | E41 E44 G21 G23 G28 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28501&r=all |
| By: | Arnold Chen; Laura Blue; Jason Tilipman; Nancy McCall |
| Abstract: | This study introduces two new claims†based measures to assess quality of care during a patient's vulnerable period following acute care. |
| Keywords: | acute inpatient care , administrative data uses , ambulatory/outpatient care , hospitals , Medicare , primary care , program evaluation , quality of care/patient safety (measurement) |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:e76848e7e06945baa3f2a2b98e059d85&r=all |
| By: | Lucie Gadenne; Samuel Norris; Monica Singhal; Sandip Sukhtankar |
| Abstract: | Recent debates about the optimal form of social protection programs have highlighted the potential for cash as the preferred form of transfer to low income households. However, in-kind transfers remain prevalent throughout the world. We argue that beneficiaries themselves may prefer in-kind transfers because these transfers can provide insurance against price risk. Households in developing countries often face substantial price variation as a result of poorly integrated markets. We develop a model demonstrating that in-kind transfers are welfare improving relative to cash if the covariance between the marginal utility of income and price is positive. Using calorie shortfalls as a proxy for marginal utility, we find that in-kind transfers improve welfare relative to cash for Indian households, an effect driven entirely by poor households. We further show that expansions in the generosity of the Public Distribution System (PDS)—India’s in-kind food transfer program—result not only in increased caloric intake but also reduced sensitivity of calories to prices. |
| JEL: | H42 H53 I38 O12 Q18 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28507&r=all |
| By: | Lustenhouwer, Joep; Makarewicz, Tomasz; Peña, Juan Carlos; Proaño Acosta, Christian |
| Abstract: | We investigate the effects of group identity and income inequality on social preferences and polarization by means of a laboratory experiment. We split our subjects into two populations: in-group (representing "natives") and out-group ("migrants"). In-group subjects repeatedly vote whether an unemployment insurance should cover all, some, or no members of their group. By means of a two-by-two design we disentangle the effect of group identity from those of income inequality. Among others, our experiment yields the following findings: (1) subjects tend to vote for less inclusive insurance schemes when they sample a higher chance of employment; however, (2) in-group subjects with an ex ante more beneficial distribution of employment chances - relative to the out-group - are less selfish and vote for more inclusive insurance schemes; (3) ex ante more beneficial relative employment chances of in-group subjects also leads to less polarization; and (4) revelation and priming of group identity does not lead to discrimination against out-group "migrants" but, on the contrary, can lead to more compassionate and inclusive attitudes. |
| Keywords: | Income Inequality,Political Polarization,Migration,Economic Voting Behavior,Group Identity |
| JEL: | C92 D72 J15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:168&r=all |
| By: | Busch, Christopher; Ludwig, Alexander |
| Abstract: | We extend the canonical income process with persistent and tran- sitory risk to cyclical shock distributions with left-skewness and excess kurtosis. We estimate our income process by GMM for US household data. We find countercyclical variance and procyclical skewness of per- sistent shocks. All shock distributions are highly leptokurtic. The tax and transfer system reduces dispersion and left-skewness. We then show that in a standard incomplete-markets life-cycle model, first, higher- order risk has sizable welfare implications, which depend on risk atti- tudes; second, it matters quantitatively for the welfare costs of cyclical idiosyncratic risk; third, it has non-trivial implications for self-insurance against shocks. |
| Keywords: | Idiosyncratic Income Risk,Cyclical Income Risk,Life-Cycle Model |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:icirwp:3621&r=all |
| By: | Kurt R. Brekke (Norwegian School of Economics); Dag Morten Dalen (Norwegian Business School); Odd Rune Straume (NIPE and Department of Economics, University of Minho and Department of Economics, University of Bergen) |
| Abstract: | Two-part pricing (the Netflix model) has recently been proposed instead of uniform pricing for pharmaceuticals. Under two-part pricing the health plan pays a fixed fee for access to a drug at unit prices equal to marginal costs. Despite two-part pricing being socially efficient, we show that the health plan is worse off when the drug producer is a monopolist, as all surplus is extracted. This result is reversed with competition, as two-part pricing yields higher patient utility and lower drug costs for the health plan. However, if we allow for exclusive contracts, uniform pricing is preferred by the health plan. |
| Keywords: | Pharmaceuticals; Health Plans; Payment schemes |
| JEL: | I11 I18 L13 L65 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:01/2021&r=all |
| By: | Caroline Margiotta; Jessica Gao; Divya Vohra; So O'Neil; Kara Zivin |
| Abstract: | Although maternal mental health conditions, which include depression and anxiety disorders during pregnancy and post-delivery, are common among Texas mothers, they often go undiagnosed and untreated. They exact a heavy toll on the economy and on maternal and child health and well-being in Texas. |
| Keywords: | maternal health, child health, health economics, mental health |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:6029977b568a407899052ca3f035ed7a&r=all |
| By: | Christoph Bertsch; Mike Mariathasan |
| Abstract: | We study optimal bank leverage and recapitalization in general equilibrium when the supply of specialized investment capital is imperfectly elastic. Assuming incomplete insurance against capital shortfalls and segmented financial markets, ex-ante leverage is inefficiently high, leading to excessive insolvencies during systemic capital shortfall events. Recapitalizations by equity issuance are individually and socially optimal. Additional frictions can turn asset sales individually but not necessarily socially optimal. Our results hold for different bankruptcy protocols and we offer testable predictions for banks' capital structure management. Our model provides a rationale for macroprudential capital regulation that does not require moral hazard or informational asymmetries. |
| Keywords: | Bank capital, recapitalization, macroprudential regulation, incomplete markets, financial market segmentation, constrained inefficiency |
| JEL: | D5 D6 G21 G28 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:923&r=all |
| By: | Felix Holub (University of Mannheim); Laura Hospido (Banco de España); Ulrich J. Wagner (University of Mannheim) |
| Abstract: | We estimate the causal impact of air pollution on the incidence of sick leaves in a representative panel of employees affiliated to the Spanish social security system. Using over 100 million worker-by-week observations from the period 2005-2014, we estimate the relationship between the share of days an individual is on sick leave in a given week and exposure to particulate matter (PM10) at the place of residence, controlling for weather, individual effects, and a wide range of time-by-location controls. We exploit quasi-experimental variation in PM10 that is due to Sahara dust advection in order to instrument for local PM10 concentrations. We estimate that the causal effect of PM10 on sick leaves is positive and varies with respect to worker and job characteristics. The effect is stronger for workers with pre-existing medical conditions, and weaker for workers with low job security. Our estimates are instrumental for quantifying air pollution damages due to changes in labor supply. We estimate that improved ambient air quality in urban Spain between 2005 and 2014 saved at least €503 million in foregone production by reducing worker absence by more than 5.55 million days. |
| Keywords: | air pollution, health, sickness insurance, labor supply |
| JEL: | I12 I13 Q51 Q53 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:2041&r=all |